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Document 39 of 54.

May 18, 2000, Thursday

SECTION: OPINION;Pg. B-12:1,7; B-10:2

LENGTH: 465 words

HEADLINE: The war is over; 'Temporary' phone tax may finally be repealed

BODY:
Way back in 1898, Congress enacted a telephone excise tax to help finance the Spanish-American war. As there was no income tax at the time, the primary sources of government revenues were excise taxes and tariffs on imports.

There wasn't much complaint about the telephone tax a century ago. That's because it applied to less than 2 percent of the population -- those rich enough at the time to afford the luxury of a phone. Also, it was understood that the tax would be temporary, lasting only for the duration of the war.

Well, here we are, a century after the Spanish-American war ended and the "temporary" federal excise tax on telephones remains in place. But it is no longer a luxury tax borne exclusively by the richest 2 percent of Americans. The 3 percent tax on local and long-distance service appears on the monthly bills of the 94 percent of American households that have phones, regardless of their incomes.

And the telephone tax threatens to reach even more deeply into the pocketbooks of Americans, what with the increasing use of cellular phones and the Internet. Every call, every Internet connection, carries a 3 percent federal tax.

It is against this backdrop that a bipartisan movement is under way in Congress to abolish the phone tax, which actually has transmogrified into a broader excise tax on telecommunications. The vehicle for this welcome tax repeal is a bipartisan bill introduced by Reps. Robert Matsui, D-Calif., and Rob Portman, R-Ohio, which was approved yesterday by the House Ways and Means Committee.

"What once was a luxury tax 100 years ago," said Matsui, "is now a regressive burden on one of the fastest-growing sectors of our economy and hits every family in this country with a telephone or Internet connection."

"If we can't repeal this 102-year-old 'temporary' tax in a time of government surpluses," said Portman, "we're all going to have to ask a serious question: Is there any tax that can be repealed?"

Indeed, the tax serves no purpose other than to drain phone users of more than $5 billion a year. The tax might be defensible if it were earmarked for improvements or expansion of phone service throughout the country, much as the federal excise tax on gasoline goes toward maintenance of highways.

However, the phone taxes paid by 99.1 million American households go directly to the Treasury Department's general-revenue fund.

It's not as if phone users will pay no tax whatsoever if the federal excise tax is repealed. They will still pay state and local taxes, as well as universal service charges (a government-mandated fee).

The telephone excise tax is a relic that Congress should have abolished a long, long time ago. But, as Reps. Matsui and Portman might say, better a century late than never.

LANGUAGE: ENGLISH

LOAD-DATE: May 22, 2000

Document 39 of 54.


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